Bernanke repeated testimony today in the Senate that he
delivered yesterday in the House, describing “positive
developments” in the job market while saying it’s still “far
from normal.” He said the inflationary impact of higher
gasoline prices is likely to be temporary.

The semiannual testimony to Congress is a contrast to last
July, when Bernanke outlined steps that the Federal Open Market
Committee took at later meetings, and to the Fed’s January
gathering, when some policy makers said more bond-buying might
be needed.

“There’s certainly nothing in the testimony, certainly
nothing explicit, to suggest that the Fed is really actively
considering additional action,” said Stephen Stanley, chief
economist at Pierpont Securities LLC in Stamford, Connecticut.
The speech countered “a strong sense among some market
participants that the Fed is ultimately going to do a third
round of quantitative easing.”

The Standard & Poor’s 500 Index rose 0.4 percent today to
1,371.75 at 9:37 a.m. in New York after falling 0.5 percent
yesterday as Bernanke’s remarks damped speculation of new bond
purchases by the Fed. The yield on the 10-year Treasury note
rose to 2.04 percent from 1.97 percent yesterday.

Economy Improving

“With the economy improving, I’m not surprised that he’s
not going to go with QE right now,” said Jon Burnham, the New
York-based fund manager whose $123 million Burnham Fund has
beaten 99 percent of rivals over the past five years. “We go
through periods when the economy just improves on its own.”

Reports yesterday and today added to evidence that the
world’s largest economy is gathering strength.

The number of Americans filing first-time claims for
jobless benefits fell to a level matching a four-year low, more
evidence the labor market is healing. Applications for
unemployment insurance decreased 2,000 in the week ended Feb. 25
to 351,000, Labor Department figures showed today.

Gross domestic product grew at a 3 percent pace in the
fourth quarter, up from an initial estimate of 2.8 percent, the
Commerce Department reported. The Institute for Supply
Management-Chicago Inc. said its business barometer climbed to a
10-month high.

The Fed’s Beige Book regional business survey, released
after Bernanke’s testimony, said the economy expanded at a
“modest to moderate pace” in January and early February,
fueled by manufacturers, including automakers. The survey is
published two weeks before the FOMC meets to set monetary
policy.

2014 Outlook

Even so, Bernanke repeated the Fed’s January statement that
economic conditions are likely to warrant low interest rates at
least through late 2014. That extended an earlier date of mid-2013.

“At present, with the unemployment rate elevated and the
inflation outlook subdued, the committee judges that sustaining
a highly accommodative stance for monetary policy is consistent
with promoting both objectives” for stable prices and maximum
employment.

Bernanke, who has kept interest rates near zero since
December 2008 and expanded the Fed’s balance sheet with two
rounds of asset purchases totaling $2.3 trillion, came under
fire from some lawmakers.

Hensarling Questions

“I question, after three years of the most highly
accommodative monetary policy, I believe, in the history of our
nation, the recent announcement that we will continue this
policy for two more years,” said Representative Jeb Hensarling,
a Texas Republican.

Bernanke, 58, acknowledged there are limits to how much the
Fed can do to boost the economy.

“Monetary policy is not a panacea,” he said. “It can
help offset cyclical fluctuations and financial crises like
we’ve had, but the long-term health of the economy depends
mostly on decisions taken by the Congress and the
administration.”

Bernanke, a former Princeton University professor, said the
FOMC’s announcement last month of a 2 percent inflation target
was aimed at providing “additional transparency” and did “not
imply a change in how the committee conducts policy.”

The Fed chairman said at times when the inflation and full
employment goals are not complementary, the FOMC “follows a
balanced approach in promoting them.”

Time Horizons

That approach will take into account “the magnitudes of
the deviations of inflation and employment from levels judged to
be consistent with the dual mandate, as well as the potentially
different time horizons over which employment and inflation are
projected to return to such levels,” he said.

The FOMC’s forecasts from January suggest policy makers see
a higher deviation in unemployment than inflation. The panel
expects inflation to be in a range of 1.4 percent to 2 percent
over the next three years.

By contrast, it forecasts the unemployment rate to be in a
range 6.7 percent to 7.6 percent in 2014, or as much as 1.6
percentage points above a longer-run estimate of full employment
of 6 percent.

Bernanke will testify in Congress again today at 10 a.m.
before the Senate Banking Committee.

“The nice thing about this is he always has a chance to
refine his message on the second day,” said Eric Green, the
chief economist and head of rate strategy at TD Securities in
New York.